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Options Basics - Stock Market Course

Welcome to another very important blog by Excel strategies. Although our all the blogs are always informative and we try our best to impart genuine and authentic knowledge to all over readers specially those who are beginning in the stock markets but this blog is going to be extra special because in this blog we will be covering complete basics of options. Options as everyone knows are really important for stock markets but some how many retail traders are always afraid of options because they find them super difficult and complicated the usually get confused between the strike prices of the options they have to choose they get confused in the call and put options the also get confused when to buy the option and when to sell the option and in this blog we will be covering everything all the basics of options so that all the retail traders can benefit and after reading this blog they will be able to understand complete basics of options however it is not possible for us to cover aap advanced Option Strategies in just one block sofa that we will be coming out with another stock market blog.

Let us start with the simple question what exactly are options and then we will see how to use them.
Options are just like insurance and works more or less same like insurance works in the case of your car so when you buy a car you are always afraid that if any accident got Forbidden happens then you will lose your big money which you have invested in the car similarly in stock market when people make big positions which are multiple Times that of cost of a car then insurance is mandatory for them and options are the only risk management tool that provide this insurance to the stock buyer now let us understand in detail how this happens.

Say for example I have bought 1000 shares of Reliance having in mind that Reliance will go up but what if Reliance does not goes up instead in spite of being such a good company it starts coming down reason can be anything may be a global market it down side or a crash in the oil prices but Reliance is coming down now in this case to protect my 1,000 shares that I have bought for Reliance I will buy insurance and to buy insurance I will have to to use options. So now you can understand that how important options are and in fact SEBI always recommends to use options to protect your positions so that you do not lose unnecessary amount in the stock markets. We Can Proudly say that we Provide the Best Stock Market Course Online

The basic understanding of buying an option is similar to buying an insurance which we want intentionally to go waste whoever buys insurance does not want accident to happen all he wants is that his car should run smoothly and just in case I got Forbidden any accident happens then the options that he has bought should I give him the insurance amount. So you can simply save that option buying is just like buying insurance where our thought process is that we are buying the insurance but we do not want accident to happen we just want that the insurance which we have bought should go waste because that insurance is not as important as the the car itself. Similar is the case in stock markets that when we buy an insurance against the stock ok we intentionally want that the insurance should go waste and our stock should not come in the need of insurance that is the accident should not happen but in the worst case scenario if the accident happens then we should have an insurance which would give us a good amount that we have lost in the trade because the stock went against us.

Now once we have understood what exactly is options and how they are important it and used as insurance in stock market let us understand the time value of insurance.
We all know that every insurance has a time value which means that if you buy a insurance it will not be valid for lifetime say for example in car when we buy our insurance it is for one year or maybe if we buy mediclaim policy e its validity is also for one year similarly when we buy an insurance in stock markets its validity e is predefined and we have to pay premium according to that the validity can be one week 1 month 2 months 3 months six months or even an year. The simple logic says that the more you want to get insured the more you have to pay the premium which is a very fair deal the more you are protecting yourself from there is the more you should pay the premium.

When we talk about the time of the options then we have various choices for Nifty and Bank Nifty we have options that are available for weekly basis and monthly basis as well so if someone wants insurance for one week he can take one week insurance if someone wants one month insurance we can take one month insurance if someone wants insurance for next 3 months or six months he can choose according to that. In stocks we do not have weekly options we only have monthly options so you can either choose from the current month or the next month are the next to next month.
This also brings an important concept of time decay that as the number of days passed by and you do not meet with an accident then the insurance gets eroded and there is a loss in premium now what that means is say for example you bought Reliance Insurance for one month think think that just in case Reliance false that you will take insurance and for that you have paid a small premium now it's been 20 days and two lines is rising so you are making profit in stocks but the premium you paid for buying the insurance or that option will decrease because now only 10 days are remaining and the probability that the accident will happen in the next 10 days is definitely less than the probability of meeting with an accident in the 30 days. So that is how time works in options as the time passes by and the accident does not happen your premium will get eroded and insurance company or the insurance seller will collect that premium if if nothing happens against you.

Now let us cover some basics of the strike price.. many times people come to us and they say that sir we are confused because we do not understand what exactly is at the money what is out of money and what is in the money and today in this blog we will teach you exactly what what is strike price and which strike price you should choose. Sense covering options in just one block is not possible for anyone so we will be coming up with the series of blogs where we will be teaching all all other aspects that one needs to know before he starts trading in options because knowledge is the king in any profession and stock market is no exception and many at times we have seen people losing money not because they were greedy but because they were greedy without knowledge.
Now let us understand the basic concept of strike price strike price you can simply say is the target price that you are looking for letters start with n example for example Reliance is right now at 2000 and you have got its 1,000 shares so 2000 we will considered as at the money because Reliance is right now at 2000 all the prices that are above 2000 will be considered as out of money because they are yet to be achieved so if we take something like 2100 or 2200 or 2300 these are all out of money because there yet to be achieved and all the prices below 2000 that is 1900 or 1800 or 1700 they are all in the money because they have been achieved so you can simply say that the prices who have been achieved are considered as in the money and the prices which are yet to be achieved are considered out of money. You can Learn More about Stock Market Options Course Here

Hope you must have understood the basics of options we will be coming up with more search amazing knowledge which will teach you and empower you with the authentic knowledge so that you can also trade in stock market like Pro traders.

At the End, we would like to conclude with only one statement that is just like any other profession in stock market also knowledge is the king..

We will be coming up with more search blogs to help the retail traders gain complete knowledge and exact professional strategies concepts and techniques that are used by Pro traders to make consistent money from stock markets.

Signing Off,
Excel Strategies